On January 1, 2020, Marin Company contracts to lease equipment for 5 years, agreeing to make a payment of $150,642 at the beginning of each year, starting January 1, 2020. The leased equipment is to be capitalized at $618,000. The asset is to be amortized on a double-declining-balance basis, and the obligation is to be reduced on an effective-interest basis. Marin's incremental borrowing rate is 6%, and the implicit rate in the lease is 11%, which is known by Marin. Title to the equipment transfers to Marin at the end of the lease. The asset has an estimated useful life of 5 years and no residual value. Click here to view factor tables.
On January 1, 2020, Marin Company contracts to lease equipment for 5 years, agreeing to make a payment of $150,642 at the beginning of each year, starting January 1, 2020. The leased equipment is to be capitalized at $618,000. The asset is to be amortized on a double-declining-balance basis, and the obligation is to be reduced on an effective-interest basis. Marin's incremental borrowing rate is 6%, and the implicit rate in the lease is 11%, which is known by Marin. Title to the equipment transfers to Marin at the end of the lease. The asset has an estimated useful life of 5 years and no residual value. Click here to view factor tables.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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